Goldman Sachs' Report on Immigration

In 2008, Goldman Sachs issued an excellent report on immigration and the American economy. You can read the report HERE. The paragraph below is probably one of the most interesting parts of the report:

Immigration is probably a small net positive for the federal budget, because incremental tax revenues outweigh the limited services allowed to immigrants. States and localities often pick up the slack in providing social services to immigrants, and therefore incur considerable costs, particularly in states with a large share of unauthorized migrants.

The costs immigrants pose to the federal budget are probably relatively low. The welfare reform passed in 1996 stipulated that states could not use federal grants to finance benefits such as Temporary Assistance to Needy Families, Medicaid, etc. to non-citizens, though they could still offer such assistance with their own funds. However, the American-born children of immigrants (whether authorized or not) are citizens and thus entitled to benefits.

At the same time, immigrants do provide tax revenues to the Treasury. Even illegal immigrants pay federal taxes: in order to demonstrate eligibility for employment, undocumented workers often use fake Social Security cards with numbers “borrowed” from others or simply made up. When federal payroll taxes and income taxes are withheld from their paychecks, funds accumulate in the Social Security trust funds with no parallel entitlement. Since the Immigration Reform & Control Act went into effect during the late 1980s, inflows into the ‘Earnings Suspense File’ have increased dramatically (Exhibit 8). The cumulative taxes held in this account are $463 billion...

The situation at the state and local levels is very different. According to a ruling of the Supreme Court, these jurisdictions cannot withhold public education and emergency medical services from either legal or illegal immigrants residing in the United States (Hanson, p. 13). As states generally foot the bill for these services, outlays for immigrants likely outweigh the corresponding tax revenues.

Like I said, very interesting stuff. Overall, it sounds like Goldman Sachs is saying that the federal government receives benefits from illegal immigration while states and local governments do not.